{
  "title": "The Role of Bank Diagnostics in IMF-Supported Programs",
  "publication": "Technical Notes and Manuals, December 13, 2019",
  "sourceUrl": "https://www.imf.org/en/publications/tnm/issues/2019/12/16/the-role-of-bank-diagnostics-in-imf-supported-programs-48824",
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  "summary": "Diagnostic studies are essential to IMF programs in situations of significant bank weakness and when regular disclosures are not reliable. Restoring bank solvency is key to maintaining financial stability and, therefore, the ultimate policy objectives of a Fund-supported program.",
  "sections": [
    {
      "heading": "Overview",
      "content": "- Diagnostic studies are essential to IMF programs in situations of significant bank weakness and when regular disclosures are not reliable.\n- Restoring bank solvency is key to maintaining financial stability and, therefore, the ultimate policy objectives of a Fund-supported program.\n- Bank diagnostics aim to ensure that existing potential losses and capital needs are identified in a timely manner and, in case public support is needed, the relevant cost is prudently incorporated in the program financing envelope.\n- Diagnostics provide assurances that financial stability risks are reasonably quantified and underpin program decisions."
    },
    {
      "heading": "Core objectives of diagnostics",
      "content": "- Provide information essential to:\n  - (i) understanding the scale and scope of banking sector problems;\n  - (ii) executing strategies for bank resolution and restructuring, including quantifying recapitalization needs; and\n  - (iii) estimating any financing needs with reasonable certainty."
    },
    {
      "heading": "Components and approach",
      "content": "- There is no single template for diagnostic studies that fits all cases.\n- An asset quality review (AQR) will always be a central component.\n- Other aspects whose relevance depends on country circumstances include:\n  - stress tests;\n  - reviews of bank viability; and\n  - reviews of funding structures.\n- The note advocates a building block approach to assessing banking businesses to form a view on long-term viability as a basis for action with respect to each institution reviewed.\n- A diagnostic exercise provides a point-in-time snapshot but can be part of a process of discovery and remediation of root causes of banks’ problems."
    },
    {
      "heading": "Implementation, governance, and participation",
      "content": "- Diagnostics are undertaken by local authorities based on a robust governance structure that provides credibility and quality assurance through independent, external participation.\n- Where resources are available and qualified, diagnostics should be performed with local participation to enhance ownership and political acceptance.\n- Diagnostics should consider local conditions."
    },
    {
      "heading": "Communication",
      "content": "- Communication is a key consideration.\n- The level of information released publicly is often dictated by circumstances."
    },
    {
      "heading": "Practical guidance and observed practice",
      "content": "- The note provides practical guidance drawing on experience rather than treating diagnostics as a narrow capital compliance event.\n- Features of observed international practice are summarized, drawing on recent diagnostic studies in Europe and on extensive earlier experiences in a range of emerging and developing country contexts."
    },
    {
      "heading": "Publication information (from the content)",
      "content": "- By Joaquin Gutierrez Garcia, Dermot Monaghan, Alvaro Piris Chavarri\n- December 13, 2019\n- Technical Notes and Manuals No. 2019/004\n- DOI: https://doi.org/10.5089/9781513520704.005\n\nThe Role of Bank Diagnostics in IMF-Supported Programs, Technical Notes and Manuals No. 2019/004; DOI: https://doi.org/10.5089/9781513520704.005\n\n---\n\n Content in this bundle\n\n- The Role of Bank Diagnostics in IMFSupported Programs; Technical Notes and Manuals;\n  - The Role of Bank Diagnostics in IMFSupported Programs; Technical Notes and Manuals; (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - The Role of Bank Diagnostics in IMFSupported Programs; Technical Notes and Manuals; (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/tnm/issues/2019/12/16/the-role-of-bank-diagnostics-in-imf-supported-programs-48824"
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    "Authors: Joaquin Gutierrez Garcia, Dermot Monaghan, Alvaro Piris Chavarri",
    "Published: December 13, 2019",
    "Series: Technical Notes and Manuals",
    "DOI: https://doi.org/10.5089/9781513520704.005",
    "Diagnostic studies are essential to IMF programs in situations of significant bank weakness and when regular disclosures are not reliable.",
    "Restoring bank solvency is key to maintaining financial stability and, therefore, the ultimate policy objectives of a Fund-supported program.",
    "Bank diagnostics aim to ensure that existing potential losses and capital needs are identified in a timely manner and, in case public support is needed, the relevant cost is prudently incorporated in the program financing envelope.",
    "Diagnostics provide assurances that financial stability risks are reasonably quantified and underpin program decisions.",
    "Provide information essential to:",
    "There is no single template for diagnostic studies that fits all cases.",
    "An asset quality review (AQR) will always be a central component.",
    "Other aspects whose relevance depends on country circumstances include:",
    "The note advocates a building block approach to assessing banking businesses to form a view on long-term viability as a basis for action with respect to each institution reviewed.",
    "A diagnostic exercise provides a point-in-time snapshot but can be part of a process of discovery and remediation of root causes of banks’ problems.",
    "Diagnostics are undertaken by local authorities based on a robust governance structure that provides credibility and quality assurance through independent, external participation.",
    "Where resources are available and qualified, diagnostics should be performed with local participation to enhance ownership and political acceptance.",
    "Diagnostics should consider local conditions.",
    "Communication is a key consideration.",
    "The level of information released publicly is often dictated by circumstances.",
    "The note provides practical guidance drawing on experience rather than treating diagnostics as a narrow capital compliance event.",
    "Features of observed international practice are summarized, drawing on recent diagnostic studies in Europe and on extensive earlier experiences in a range of emerging and developing country contexts.",
    "By Joaquin Gutierrez Garcia, Dermot Monaghan, Alvaro Piris Chavarri",
    "December 13, 2019",
    "Technical Notes and Manuals No. 2019/004",
    "DOI: https://doi.org/10.5089/9781513520704.005",
    "**The Role of Bank Diagnostics in IMFSupported Programs; Technical Notes and Manuals;**"
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